A Fistful of Bitcoins

Ed zillion takes us to the wild wild west of digital culture. The Libertarian Millennium, if you will. A place where the twin technologies Bitcoin and Tor have led to the emergence of an online community like no other with its own marketplace and its own currency.

A place inhabited by a disparate collection of cyber-utopians, digital activists, scammers and their inevitable marks. A place where you can buy LSD and shotguns online and brag about it. It’s a lot like some squat houses I have lived in – one half idealists and the other half people only idealists could put up with.This scene wasn’t born wholly-crafted onto the internet like a 4chan meme, it has been developing for a long time now, intimately related to the ongoing battle for control over the internet, and specifically over the right to be anonymous online.

On one side we have corporations and governments variously motivated by profit or security (paranoid security it may well be) and on the other a fairly dismal cast of digital rights campaigners such as the Electronic Frontier Foundation and the occasional mob of disgruntled randomers from reddit or Facebook or whatever. Recent skirmishes include the ACTA “anti-piracy” bill which was rejected by the EU parliament in June, and last year’s financial blockade by VISA/Mastercard/Paypal/etc of Wikileaks.

The Wikileaks saga was a blessing in disguise for the doomsayers, here was a perfect example of what could happen in a world where financial corporations control the flow of money on the internet. Any activism that goes against the wishes of these corporations and needs to sell products or receive donations can be censored without the need for governments to get involved in the whole grubby process. The debate sparked by this incident led to a lot more attention being given to technologies that could circumvent these restrictions, among them Bitcoin & Tor.

Tor has been around for some time, originally created by programmers motivated by fears of censorship and surveillance of the Internet. The Tor client software routes traffic through a worldwide network of servers to conceal a user’s location or usage from anyone conducting network surveillance or traffic analysis. Tor allows users to surf the web anonymously, but it also allows websites to be hosted anonymously too.
Bitcoin is the new kid on the block. The very definition of disruptive technology. How Bitcoin works is a fascinating feat of engineering, so fascinating that I am not going to go into it for fear of losing my audience.

Suffice to say, Bitcoin is a peer-to-peer digital currency which has no central issuing authority (which is an astounding feat in itself, and one which many thought impossible) which by its nature is anonymous and irreversible. Think about it like online cash: cash transferred by sending someone a digital signature on the internet instead of a greasy 20 rolled-up-and-palmed-off in the alley behind Supermacs. Bitcoins are created by computers that run complex computational problems and through an ingenious and beautiful design, the owners of these computers are compensated for their efforts to provide security to the Bitcoin network by receiving a reward of 50 bitcoins for solving one of these problems.

The total value of all bitcoins in circulation (10.231m) is currently about €93 million at a valuation of €9.10 per bitcoin. From the very beginnings, when a bitcoin could hardly be said to have any value at all (it is hard enough getting your head around assigning value to a string of alphanumeric digits in the first place) it has fluctuated wildly in price, at one stage trading at over €24 in June 2011, giving rise to a situation in which one early adopter bought a pizza for 10,000 bitcoins that would have been worth €24,600 a year later! I hope he enjoyed it.

All very interesting stuff that I could elucidate at length, though what you want to hear, I suspect, is about ‘drugs on teh internets’.
So here we go: there is a website, accessible using Tor on which one can purchase from a whole range of illicit products. Listings as I write include drugs: “1g of Pure Flake Cocaine Uncut” for 9.95 bitcoins (€95) or how about that gram of crack cocaine you always wanted? Only 12.21 bitcoins (€115)! Among other stimulants, psychedelics and similar substances, probably the biggest market is weed. Lots and lots of weed. From around 5 bitcoins for an eighth of chronic down to about 1 bitcoin/gram of the cheaper stuff. And all listings replete with user reviews such as this recent one on a listing for “1G- Moroccan Pollen – Nxt Day Delivery”: ‘5 of 5 excellent, nice hash as usual, and next day delivery, cheers’. While drugs are the biggest market on Silk Road, for obvious reasons, listings also include hacking tools, lab supplies, chemicals, food, the ubiquitous porn, software, forgeries (need that get-out-of-jail in case Ireland goes down the swanny? Get your fake UK passport for the competitive rate of 470 bitcoins or €4380), as well as the relatively benign, such as art, literature etc, though I gather they do little enough business.

The thing is, it works. I have, for research purposes you see (The Pete Townshend Defence), purchased from Silk Road. I received my letter addressed to one ‘Monsieur Dred’ a few weeks after purchasing my eighth of orange bud and after skinning up a jasper with smoking silver and just the smallest amount of Golden Virginia I sat back and savoured the crispy nugs cracking away as I thought about this development:
We may not all be Rand-carrying libertarians but I think most of us would agree that the current climate of drug prohibition is anathema to our perception of a moral society, since we should a priori have the right to ingest whatever substances we so wish, as long as it does no harm to other members of society. On a more technical level I think many of us have realised that the negative effects of prohibition have caused more societal harm than the substances would themselves.

I think that many of us would secretly cheer on these cyber-utopians for making the War Against Drugs look as silly and misguided as it really is, but this is an easy case. Until recently The Silk Road also sold guns. One could purchase from a range of weapons and ammunition including handguns, semi to full automatic rifles, grenades etc. Depending on your political stripe you may be cool with an anonymous marketplace selling heavy weaponry but what about snuff videos, or child porn? Thankfully none of these are sold on Silk Road but Bitcoin & Tor, with their anonymous nature, make it possible for other websites to exist selling this kind of stuff. The same features that make it possible to buy drugs from Silk Road make it a lot harder to track paedo rings on the Internet, as most of the major busts have involved tracking credit card transactions.

Up to now there haven’t been any large crime networks using bitcoin uncovered and, despite calls by US congressmen for investigations into The Silk Road by the FBI, it has continued trading. What is far more common are raids by hackers such as the raid on Mt.Gox (the largest bitcoin exchange) that caused the price to nosedive from $16 to 1¢/bitcoin in a matter of minutes and scams like the recent Bitcoin Savings & Trust ponzi scheme where some internet huckster made off with $5.6m worth of bitcoins after offering returns of 3700%/pa (I did mention the marks, didn’t I?) But so far these are still otherwise harmless young hackers behind computers fighting over their stash – sooner or later a more serious criminal gang will start using it and there will be a large bust, and as long as bitcoin can be traded for dollars or euro the probability of it being used in the sale of child pornography increases. This will be the number one most effective argument against Bitcoin, Tor and anonymity on the Internet in general, it is one that will be used, and I am not sure that there is a thoroughly convincing argument against it.